Some of you may know that since the beginning of the year the Romanian currency appreciated against the euro with about 13.5%. While this is a sign of national economic growth, it is also a very dangerous thing for the Romanian companies which have revenues coming from abroad - and Krogos is one of them. It is a well known macroeconomic fact that a weak currency favors the exporters and a strong one puts the importers in a favourable position. Nothing spectacular so far, except for the fact that for 2005 the Romanian government predicted an average of 42k ROL for an euro (now it is 35.5k) while the National Bank's representatives just announced that it's likely to have an average of 33k. On top of that I heard some ("expert") opinions claiming that the euro would go as low as 25k. That's quite a difference I would say, and gives me some worrying grounds - basically it means a rethinking of the capital budgeting forecasted for the entire year.
So what can be done? One option would be hedging your revenues by getting streams from local clients as well, at least as much as it could cover the working capital needs. Two problems here though: 1. it doesn't mean you don't lose on the ROL appreciation and 2. there's no point in keeping foreign currency blocked in the bank - you still need to move the money as keeping it in the bank is a lousy investment, a very marginal return that is. And that involves changing euros into leis - again a losing position.
Another option would be directing the foreign cash towards purchasing long term assets such as equipment investments or such. While the software industry is labour intensive, it is obviously that besides the PCs (which are mainly commodities) there's no other equipment related to the core competence that would be attractive.
A third option (closely related to the second) would be investing in real estate. While real estate is one of the hottest areas to invest in Romania nowadays this could become a tricky one, especially for a company not in this biz. The reason is simple - except for the cases when you pay everything in one installment, (and I doubt a SME would have that kind of cash in hand) it can get very risky for becoming decapitalized, in the cases of small businesses the monthly cash flow is the most important financial aspect to keep in mind.
Any other scenarios that I'm missing?
Found ROL/USD and ROL/EUR charts on Yahoo. Does anyone know of better charts with a wider timeframe? http://finance.yahoo.com/q/bc?s=ROLUSD=X&t=2y http://finance.yahoo.com/q/bc?s=ROLEUR=X&t=2y Looks to me that it's more of a return to the levels of 2 years ago, as a result of the perception abroad of a significant improvement in the governing of Romania (and neighbors).
here -- the data is as old as January 6, 1998. Thing is that there's plenty of euros in the market (consider that last year there was a $3.8bn FDI level). Yesterday for example the Romanian National Bank acquired about 100 mil just to stabilize the situation as the exchange rate had gone to some 33k. As such today one the euro can be bought for about 36k.
What is the situation nowadays with the Romanian infrastructure? Can one invest in highway or railway stock?
I am not sure I know what you mean - the national companies in charge are not publicly traded and there are underlying projects for infrastrcture development such as the one for the Brasov - Cluj highway given to Bechtel. I guess you may remember the last year's scandal when there wasn't any bidding preceding the project executor assignation.
You understood me well, I thought these things were freely transacted on the stock market. Shouldn't this be a normal thing though? Sorry for my ignorance.
"Shouldn't this be a normal thing though?" -- they should be normal perhaps in the sense of the companies being publicly traded on the stock exhange. It is not unlikely though that the State keeps in its hands some companies acting in strategic industries. Also, you may be aware that several things in Romania have a different measurement for what you or me would call normal :)
its effects may be undesired. everything will appreciate, unless something catastrophic happens, and the people will have to quickly adjust in order to make the best out of it. flachi dela http://peromaneste.blogspot.com